Nonprofits Coping in Tough Financial Environment

WASHINGTON (AFP eWire - Jan. 26, 2004) - U.S. nonprofits faced a daunting economic atmosphere last year but managed to cope by responding actively and creatively to fiscal pressures, a new report says.

'Stressed But Coping: Nonprofit Organizations and the Current Fiscal Crisis' was released Jan. 19 by the Johns Hopkins Center for Civil Society Studies as part of its ongoing Nonprofit Listening Post Project.

The report is based on an online survey of senior executives at 236 organizations and was conducted between October and December 2003.

Nearly 90 percent of the organizations reported some stress over the last year, with 51 percent reporting severe or very severe stress. While 64 percent of organizations reported revenue increases, they were forced to cope with rising costs as well - costs that were often greater than the revenue increases and included areas such as liability and health insurance.

The survey showed that nonprofits used a variety of techniques to deal with their financial pressures. Among the most used strategies were:

new funding initiatives

new program initiatives

belt tightening

eating reserves

collaboration and

expanded advocacy

Eighty-two percent of all organizations expanded private fundraising and 84 percent expanded their commercial income. Different types of organizations relied on different funding strategies, the survey showed. While museums and theaters relied more on private fundraising, family and children service agencies relied more on government support. Furthermore, 70 percent of museums sought more corporate donations, while 60 percent of community and economic development groups went after new foundation support.

And while 44 percent of nonprofits were able to add new programs, they were also forced to make cuts. More than half froze salaries, cut benefits or increased staff hours, and 72 percent postponed new hires, eliminated vacancies or increased reliance on part-time staff.

However, the popularity of an approach did not mean it was the most effective. Although the vast majority of the groups pursued more private contributions, it was not in the top 10 for most effective strategies. Much more effective were cost cutting, reduction of program jobs and reduction of administrative overhead and jobs. These efforts did have their downsides, as nonprofits felt the burden of having fewer staff or fewer hours to do the same amount of work, the report said.

Many of the organizations were 'guardedly optimistic' about the future, according to the report, with 46 percent expecting continued revenue growth. Forty percent expected their activities and services to grow in the next year. In addition, 80 percent expect that conditions will improve over the next year or that they have made or are making the necessary change to get through the tough times.